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Who Will Pay For My Damage?


A simple question that can have a simple answer.

If you have Collision Coverage or Comprehensive Coverage on your own Auto Policy (depending on the cause of damage), your insurance company will pay for the damage to your vehicle regardless of who may have been at fault in the accident or incident (assuming you have not intentionally caused the damage yourself). Collision and Comprehensive Coverage covers damages sustained by your vehicle. This is the coverage that would be required by your lender if you have a lien on your vehicle. If you have a lien on your vehicle but do not have Collision and Comprehensive Coverage on your own policy, the lender will probably have purchased VSI (Vendor's Single Interest) coverage.

In effect, this is Collision and Comprehensive Coverage that protects the interests of the lender only . . . not the owner/borrower. The most that would be paid out on VSI coverage is the lesser of either the cost of repair, the ACV (Actual Cash Value) or the remaining balance owed on the loan. Any equity you may have in you vehicle is not insured by VSI coverage. In order to protect your equity interest in your vehicle, you should have Collision and Comprehensive Coverage on your own auto insurance policy.

If you do not have Collision and/or Comprehensive Coverage on your own policy and the damage is the result of negligence of another, your only remaining option is to collect from the negligent party who caused the damage. Hopefully, that party will have Liability Insurance that will pay you on behalf of their insured. If another party is responsible for your damage but does not have insurance, your only remaining option is to pursue your claim against the negligent party personally.

If the responsible party does not voluntarily pay for your damages, you may have to pursue legal action against them. If your total damage is $5,000.00 or less (contact Justice Court or Small Claims Court in your area to verify their authority limit), you can utilize the services of Justice Court. A Justice Court action can be rather quick (less than 3 months), is relatively simple and can be pursued at a minimum of cost. If your damage is over the limit of Justice Court, you will have to bring your action in Superior Court which will be much slower and probably much more expensive (legal representation is recommended). The moral here is simple: if you can not afford to do without it . . . insure it!

If you are fortunate enough to have the option of collecting for your vehicle damage from either your own insurance company or the other party's insurance company, we recommend you utilize your own coverage. We make this recommendation for three reasons:

- In most states, your insurance company can not increase your future auto insurance policy premiums for claims submitted which did Not involve negligence on your part.

- Your own auto insurance policy affords you Rights that you do Not have in your dealings with they other party's insurance company. Chief among those rights is your access to a quick and cost effective process for resolving disputes.

- In the event your vehicle is a legitimate candidate for a Post-Repair Diminished Resale Claim, you do not want to exhaust the coverage limits of the other party's insurance just for repairing your vehicle.

If the repair of your vehicle even begins to approach $10,000.00, use your own Collision Coverage. Using your own Collision Coverage may mean an investment on your part in an amount equal to your policy deductible. However, the other party's insurance company will probably be happy to pay you your deductible . . . up front! That would minimize the need for capital commitment on your part while still leaving your options open.